The central bank of Russia has revoked the banking licence of ROSCOMSNABBANK, with effect from 7 March 2019.
The Ufa-based bank focused on funding construction projects.
Its model was to offer loans to firms owned by the partners of the bank’s ultimate owners and their affiliates.
This was funded through capital raised from households.
However, the volume of construction project loans was said to have exceeded the capital of ROSCOMSNABBANK by more than three times.
An inspection was carried out, which revealed misconduct at the bank.
Commenting on the issue, Bank of Russia said: “The credit institution accepted household funds for corporate customers at an elevated interest rate (crowdfunding platform); these funds were ultimately used in lending to a number of companies.
“Retail liabilities on such investments were actually redeemed from newly raised household funds.”
The activity was supported by an aggressive regional advertising campaign, the central bank alleged.
The bank was also accused of hiding its real financial position.
Before revoking the licence, the central bank imposed restrictions on its household deposit taking activities.
Currently, the central bank has appointed provisional administration at ROSCOMSNABBANK and also suspended the powers of the bank’s executive bodies.
Moreover, the bank has been stripped of its professional securities market participant licence.
As at 1 February 2019, Roscomsnabbank was the 132nd largest bank by assets in Russia.